Russia’s war against Ukraine has permanently damaged its oil market, says IEA.
- The Paris-based International Energy Agency (IEA) put out its annual World Energy Outlook report on Thursday.
- The 524-page report discusses the state and future of potential energy sources as the world moves towards green energy, but says Russia does not have a strong place in that future.
- “Russia’s invasion of Ukraine is prompting a wholesale reorientation of global energy trade, leaving Russia with a much-diminished position,” says the IEA.
- “Russian fossil fuel exports never return—in any of our scenarios—to the levels seen in 2021, and its share of internationally traded oil and gas falls by half by 2030,” it continues.
- “Many of the contours of this new world are not yet fully defined, but there is no going back to the way things were.”
Why it’s Important
Russia’s invasion of Ukraine on February 24 has dragged into its ninth month and the consequences will continue to hurt the country in the long term. The shutdown of Nord Stream pipeline sent Europe into its ongoing energy crisis—hurting Europe and forcing it to seek alternative energy sources. Investments in green energy are going to shrink the demand for oil in the long term.
Oil and natural gas aren’t going to go away in the short term though. As we previously reported, the IEA predicts fossil fuels will peak by 2035 and slowly decline after that. Fossil fuels will continue to be a requirement in the immediate future.
Russia will not benefit from that though according to the IEA. The Russian invasion and its subsequent actions have permanently damaged the country’s world standing and the IEA believes its market share will diminish over time.
“Russian oil and gas revenues will drop by more than half, from $75 billion last year to less than $30 billion in 2030. And as Europe rapidly switches to supplies from the U.S. and the Middle East, Russia’s global will steadily shrink further. That’s a dizzying change for Putin, whose country until last year supplied a whopping 20% of the world’s fossil fuels,” says Fortune.
“The IEA believes this year’s seismic events could push countries to speed up their energy transition, since EVs, and solar and wind power are increasingly seen as far less vulnerable to upheavals from war and sanctions. What is unclear is whether a global recession might rein in government investments in renewable energy. ‘A key question for policymakers is whether the crisis will be a setback for clean energy transitions or will catalyze faster action,’” says Fortune.